Land Transfer Taxes in Ontario

In Ontario, there is a land transfer tax which is imposed when transfers of land take place. A key concept is the actual transfer of land. So, the registration of a deed in favour of a third party will precipitate the imposition of the tax, whereas a mortgage or a change of control in a corporation will not.

Until 1997, the Land Transfer Tax Act, imposed a tax burden equal to 20% of the purchase price upon non-residents. That tax has now been eliminated and non-residents pay the same tax as residents.

The amount of the tax graduates from one-half of one percent to two percent of the purchase price.

Here are the rates:

$0 to $55,000 - .005 ($275)

$55,000 to $250,000 - .01 ($1,950)

$250,000 to $400,000 - .015 ($2,250)

$400,000 plus - .015 {plus.005 for homes} ($1,000)

The additional .005% applies only to single family houses with values in excess of $400,000. Other properties continue at the high rate of .015%. So, that means a Pension plan or insurance company purchasing a $ 20 million commercial plaza will pay the high rate of 0.15% on the value in excess of the first $250,000, however a single family homeowner will pay the high rate at .02% for the value above $400,000.

Using a quick example, a single family homeowner would pay $ 5,475 in land transfer tax on a $450,000 home. The amount of the purchase price is required to be disclosed in an Affidavit of Value and Consideration.

The only items excluded are chattels. Previously, the tax payable upon them was Retail Sales Tax computed at the rate of 8%. This changed with the introduction of the HST. While it would have been easy to speculate that the new rate would have been 13%, in a rather surprising move Canada Revenue Agency decided not to impose the HST. So, at this point in time, chattels in a real estate transaction will not be subject to HST.

There is a government incentive to encourage first time home buyers to acquire new homes. New homes means “newly constructed. It means a house that has a warranty issued under the Ontario New Homes Warranties Plan Act.

There are a few matters to ensure that the buyer is entitled to a refund:

• It must be a principal residence

• It must be occupied within 9 months of the closing date

• The buyer must be at least 18 years of age

• The buyer must not have owned a home (or even a %)

• The buyer’s spouse must not have owned a home (or even a %)

If the buyer acquires the property with someone who does not qualify for a

rebate, they will still be entitled to a rebate in accordance with their percentage interest in the property.

If you are planning to avoid the imposition of Land Transfer Tax, be careful. You will require legal counsel since the Act has been amended to include beneficial acquisitions.

This tax applies throughout Ontario. For properties within the City of Toronto, there is also a Toronto Land Transfer Tax.